California’s bold experiment with a $20 minimum wage for fast-food workers has backfired, costing the state thousands of jobs.
According to the New York Post, a recent study reveals that the wage hike, effective since April 1, 2024, led to a loss of 18,000 jobs in the state’s fast-food sector, igniting fierce debate over government intervention in labor markets.
Let’s rewind to the beginning. In April 2023, Gov. Gavin Newsom signed AB 1228 into law, a bill passed by the California assembly in September 2023 that raised the minimum wage for fast-food workers from $16 to $20 per hour.
This legislation also established the Fast Food Council, a body with the power to set and adjust the sector’s minimum wage annually starting January 1, 2025. The wage increase took effect on April 1, 2024, impacting hundreds of thousands of workers. Before this policy, California’s fast-food sector was growing at a pace similar to the rest of the nation. That trajectory changed sharply after the law’s enactment.
According to a July 2025 study by the National Bureau of Economic Research (NBER), employment in California’s fast-food industry dropped by 2.3% to 3.9% compared to national trends. This decline stands in stark contrast to a slight national increase of 0.1% in the same period.
The NBER researchers, Jeffrey Clemens, Olivia Edwards, and Jonathan Meer, estimate a staggering loss of 18,000 jobs in the sector relative to what might have been without the wage hike. Their findings suggest that while other parts of California’s economy aligned with national patterns, fast-food employment took a unique hit.
“Following AB 1228’s enactment, employment in the fast food sector in California fell substantially,” the researchers noted. They peg the decline at a range of 2.3% to 3.9% across various analyses.
Critics of the policy see this as a cautionary tale. Rachel Greszler of The Heritage Foundation warned, “The consequences of that wage hike on the fast-food industry should be a warning sign.” She argues that wage controls historically fail because policymakers can’t dodge the economic fallout.
Not everyone agrees with the NBER’s grim assessment. Tara Gallegos, Newsom’s deputy director of communications, called out what she sees as “false or misleading information” tied to past reports from the Hoover Institution, which she links to the NBER study.
Gallegos points to a San Francisco Chronicle article from October 2024, which argued the wage hike defied many negative predictions. She also cites a UC Berkeley study from February 2025, showing wage gains of 8% to 9% for covered workers with “no negative effects on fast-food employment.”
That UC Berkeley study, covering data from April to mid-December 2024, even found that fast-food establishments grew faster in California than elsewhere in the U.S. Menu prices, it noted, rose by just 1.5%, or about six cents on a $4 burger.
Meanwhile, other wage hikes loom on the horizon. Los Angeles recently voted to raise the minimum wage for hotel and airport workers to $30 by 2028, a move that could echo similar economic ripples.
For investors and business owners, this saga underscores a critical lesson: government mandates can reshape markets in unintended ways. Consider diversifying investments beyond sectors vulnerable to wage policies, and keep an eye on states with aggressive labor regulations.
California’s $20 wage experiment is a real-world test of economic theory. While some see higher wages as a win for workers, the job losses highlight the trade-offs of heavy-handed policy. Stay informed—your financial future may depend on understanding these dynamics.